Petrobras ordered to refuel Iranian vessels

Brazil's supreme court has ordered state-controlled Petrobras to supply bunker fuel to Iranian grain vessels stranded off the southern coast since early June, the latest in an ongoing rift with broad diplomatic implications.

In a solo ruling last night, supreme court justice Dias Toffoli upheld a local court decision that obligated Petrobras to refuel the two vessels, Brazilian jurists familiar with the matter tell Argus. The decision, still under seal, is aimed at easing tensions between the two countries with a long trade history, particularly in agricultural products.

The Bavand and the Termeh, both owned by Islamic Republic of Iran Shipping Lines and operated by Iranian shipping firm Sapid, have been requesting fuel for a return journey after discharging urea cargoes in Paranagua Bay for Brazilian firm Eleva. Urea is covered by US sanctions on Iran, although the corn the two ships would carry back to Iran is not.

Transpetro, the logistics arm of Petrobras, denied a request to refuel the vessels, citing US sanctions.

Petrobras said it has yet to receive notice of the new court decision, but will analyze the ruling once it is received.

Last week, Eleva secured an injunction from a state court in Parana obligating Petrobras to supply 1,700 tons of fuel to the vessels under threat of fines. Petrobras and the government appealed the decision.

The full court is currently in recess and will only return to its normal schedule next week.

Toffoli's decision, which can still be appealed to the full court, runs counter to the federal government's argument that refueling the ships puts both Petrobras and its controlling shareholder--the federal government--at risk of serious damages.

Pressure was ratcheted up earlier this week when Iran's ambassador in Brasilia, Seyed Ali Saghaeyan, told reporters that denying fuel to the vessels could prompt the country to look elsewhere for the agricultural goods the country currently imports from Brazil.

The 53,546dwt Supramax bulker Bavand already loaded 48,000 t of corn at Imbituba port in Santa Catarina, a Paranagua port operator said. The 75,249dwt Panamax bulker Termeh is waiting for bunker before traveling to the same port for a 65,000 t cargo of corn.

Islamic Republic of Iran Shipping Lines, Sapid and Eleva were not available to comment. Calls and emails to the Iranian embassy in Brasilia went unanswered.

Islamic Republic of Iran Shipping Lines and Sapid are specifically sanctioned by the US as part of its wider campaign against Tehran.

Brazil's far-right president Jair Bolsonaro, an outspoken supporter of US president Donald Trump, says his administration is aligned with Washington on this matter.

The predicament in Brazil coincides with rising tensions in the Strait of Hormuz after Iran seized a UK-flagged oil tanker on 19 July.